Investment ratio exceptionally low

30/07/2010 09:30

In 2009, the value of fixed capital formation in the Netherlands was 19 percent of the gross domestic product (GDP). The investment ratio was exceptionally low. On average throughout the past three decades, the ratio stood at more than 21 percent.

Investment ratio in the Netherlands

Investment ratio in the Netherlands

Investment ratio dramatically down

In 2009, the investment ratio was much lower than in the preceding year. This is mainly caused by a decline in private sector investments. The investment ratio was with something over 15 percent even below the average level over the past thirty years. Public sector investments have varied between 3 and 4 percent of the GDP over the same period.

Investments in residential building, transport equipment and machinery dropped dramatically. The downturn occurred simultaneously with the global economic recession. In previous periods of recession, like in the early 1980s, the investment ratio was also extremely low.

Investment ratio in 21st century structurally lower than in the 1990s

The investment ratio in the first decade of the 21st century was structurally lower than in the 1990s. Investments in machinery and installations as a percentage of the GDP declined considerably. Possibly, the fact that the services sector has become increasingly important for the Dutch economy plays a part in this respect. After all, the importance of the manufacturing industry for the Dutch economy as a whole has diminished since 1999, while commercial services have gained importance. In the sector commercial services, investment spending in machinery and installations is generally lower than in the sector manufacturing industry.

Investment spending per product group

Investment spending per product group

Investment ratios in other European countries also low

In most other European countries, the investment ratios were also lower in 2009 than in 2008, but in the first decade of the 21st century, the investment ratio in the eurozone was not structurally below the average level in the 1990s. In the beginning of the 21st century, investment ratios in some European countries, like Spain and Ireland even soared. A growing percentage of the GDP in these countries was invested in residential building. In 2008 and 2009, investment spending in residential building collapsed. In Germany – the eurozone’s largest economy – the investment ratio behaved similarly to the investment ratio in the Netherlands.

Investment ratios by country

Investment ratios by country

Wouter Jonkers